Abstract
Report Assesses the Durbin Amendment and Considers the Impact Across
Stakeholders and the Future of Payments.
Boston, MA -- Now that the Durbin Amendment (Regulation II) has been
moved from possibility to reality, we must put this legislation in context of
the current dynamics within and around the payments market. Mercator' s new
report, Durbin Amendment Final Rules: Analyzing Settling Dust, takes a wide
market view across its primary stakeholders. By incorporating expert analysis
alongside findings from executive interviews and conversations, the report
presents a picture of the present and, what could be, the future state of the
debit card industry.
In the report, Mercator thoughtfully examines major components of the final
rules, presents the potential impact each may have on the market, and offers
an organizing framework for considering the Amendment' s impact on the U.S.
debit payments industry moving forward.
“In response to the Durbin Amendment, we believe it is reasonable to
assume that the FI market will more rapidly build efficiencies and
aggressively compete to gain more financial services activity per
consumer,” Patricia Hewitt, director of Mercator Advisory Group' s
Debit Advisory Service comments.
Highlights of this report include:
A discussion of market dynamics that lead to the Durbin Amendment being signed
into law.
Review of the changes taking place in the non-interest revenue streams
supporting retail depository accounts in the United States.
A detailed discussion of the major components of the legislation
including:
The potential impact on the small/medium sized financial institution market,
and why interchange fee regulation may be a small part of a much larger
challenge for this group of issuers.
How issuers may react to the surprising new exemption criteria for prepaid
card programs.
What the upside is in being designated a regulated payment card network.
The long-term impact of the Durbin Amendment as a catalyst for material change
in the current system of interchange fees. The areas where the Amendment has
the potential to start a new round of market constriction, and the providers
that would benefit from this shift.
One of 11 exhibits in this report:
This report is 35 pages long and has 11 exhibits.
Companies mentioned in this report include: Federal Reserve Bank, Visa,
MasterCard, American Express, PayPal, First Data, PULSE, Shazam, Fiserv, FIS,
Citibank, JPMorgan Chase, Wells Fargo, PNC Bank, U.S. Bank, and Discover.
About Mercator Advisory Group
Mercator Advisory Group is the leading, independent research and
advisory services firm exclusively focused on the payments and banking
industries. We deliver pragmatic and timely research and advice designed to
help our clients uncover the most lucrative opportunities to maximize revenue
growth and contain costs. Our clients range from the world' s largest payment
issuers, acquirers, processors, merchants and associations to leading
technology providers and investors.
Table of Contents
Executive Summary
Introduction
- Background
- Final Rules Synopsis
- Implementation Timeline
Debit Interchange Rate Structure
The Fraud Adjustment
The Asset Size Test
Two Network Requirement
- Traditional Debit Issuer Perspective: One Signature/One PIN
- The Prepaid Card Problem
Merchant Routing Control
The Unregulated Networks
- American Express and Discover
- Non-Traditional Payment Systems
GPR Cards
- The Surprise Requirement
- The Card-Only Problem
A “Dusty” Opinion
- The System of Interchange
- Splitting the Market
Table of Figures
- Exhibit 1: Durbin Amendment Implementation Timeline
- Exhibit 2: Estimated Debit Interchange Revenue Impact, Top Five Debit
Issuers
- Exhibit 3: Estimated Cost to Issue EMV Cards in United States.
- Exhibit 4: Exempt/Non-Exempt Issuers by Institution Type
- Exhibit 5: Bank Efficiency Ratio by Asset Classification
- Exhibit 6: EFT Network Ownership
- Exhibit 7: Consumer Payment Characteristic Preference
- Exhibit 8: American Express Presentation to Federal Reserve Staff
- Exhibit 9: Visa Network Alliances and Acquisitions, 2009-2011
- Exhibit 10: Consumer Opinions of Non-Bank Delivery Channels for GPR Card
Products
- Exhibit 11: Debit Card Market Lifecycle
